Charge backs are a good thing in multi level marketing. In fact, I would go as far as to say that if you are not with a company that offers charge backs, there is a possibility that your company might not be around to pay that passive and residual income that you joined this industry to obtain.
Now, I’m sure I’ve probably confused a LOT of people by that statement so let me elaborate.
First off what is a charge back? A charge back is an event that occurs when you are involved in a situation where you are being paid advanced earnings. If the earnings that you are being advanced do not earn out according to the company’s earnings schedule, a charge back occurs and they take the unearned difference out of your next commission check.
How in the world is less money a good thing?
Understand something; I’m not saying that receiving a charge back is a good thing. What I’m saying is being involved in a company that offers charge backs is a good thing.
In order for a company to offer charge backs to begin with, you have to be in a situation where the company is paying you advanced earnings. This is a very common practice in the insurance world, but is relatively unknown in the multi level marketing realm. An advanced earning is when the company pays you upfront money based on the assumption that the customer you signed up is going to remain a customer for a set number of months.
That is a very powerful concept.
Imagine if you applied for a job and the employer told you that upon accepting you into this position, we are going to pay you 12 month’s worth of salary upfront. This is because we know that the large majority of people that we hire stay with us for at least 12 months and we want to motivate our employees with as much income as possible. Now you can take as much of an advance as you want up to 12 months or you can not take an advance at all if you choose. The choice is up to you.
How many of you would call that a good situation?
Well, that’s exactly what advanced commissions are. The company is paying you for signing up a customer a set number of months in advance because they know that their average customer is going to remain a customer for at least that amount of time. If your company is doing that, it is considered a very good thing. This is because your company trusts that most of your customers are going to remain customers for a very long time and are putting their money where their mouth is.
If the company is right, and chances are they are if they have been around for any length of time without running out of money, that means that you have a great opportunity to earn passive income as well as residual income for years and years to come.
Now, if your job paid you 12 months of salary upfront assuming that you were going to stay there for a year and you only stayed there for six months, shouldn’t your job have the right to take back the other six months worth of salary that they advanced?
Of course they do.
It’s the same with advanced commissions. If your customer doesn’t remain a customer for the full advanced period, the company absolutely has the right to take back the money you didn’t earn.
So think about the product you currently offer right now in multi level marketing. How many months in advance does your company pay you every time you make a sale? If the answer is only one, then your company doesn’t offer advanced commissions. What this means is that your product is not a product that the company can pay advanced commissions and not go out of business. If it was, your company would be paying advanced commissions because any smart company wants as much money as possible to go out to the people bringing in business.
Also keep in mind that in company’s that pay advanced commissions, you can decline and go “as earned” if you want to. In that type of scenario there will be no chargebacks because you are being paid as the customer earns out by keeping your product or service. Also, when a chargeback occurs, they don’t physically go into your bank account and take the money. They take the money out of your next commission check. This is a huge risk to the company because if you decide to write a bunch of bad business and then quit, the company is stuck and has no recourse to get that money back from you.
So if your goal is to make the most passive and residual income possible, doesn’t it make sense to align yourself with a company that has enough confidence in its product or service to pay you in advanced knowing that most customers remain customers for months and years to come?